Short the big housing short

Christopher Joye

Coolabah Capital

In The AFR I explain why you would be better off shorting the hedge funds' "big Aussie housing short" that has attracted hysterical media attention in the last 24 hours. While I have argued since 2013 that Aussie housing is becoming increasingly overvalued, we still forecast double-digit growth in 2013 and 2014, strong single-digit growth in 2015, and capital gains at 1 to 2 times the pace of wages in 2016, which is exactly what has transpired. What these hedge funds talking up their own (belated) bank shorts---which we have advocated for completely different reasons---have missed is that it is actually easy to rationalise current Aussie house prices if you think interest rates will remain "low for long". Excerpt: "Dr Alex Joiner has demonstrated that if you take the median house price in 1985 and adjust it only by disposable income growth between 1985 and 2015 and the change in borrowing capacity (via generally declining mortgage rates, not loan-to-value ratios), you find that the 1985-adjusted value is 1% above current median prices. Read free here (VIEW LINK)

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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